Quoted from JodyG:Given the market saturation we are seeing in the pinball world lately, I have to wonder if the traditional distributor model is going to eventually go by the wayside in the coming years. I know there are a lot of distributors on this site, and I am not lobbing flaming arrows your way. However, I think market forces are going to cause a change to come sooner or later when it comes to the way pinball machines are sold.
Deeproot has been rumored to be planning to disrupt the marketplace pricing in some way. Lets say they do this, and sell machines for less than Stern Pro pricing. Stern, in an attempt to compete, could severely disrupt the pinball marketplace by going to a direct distribution model. We have recently come to know that wholesale pricing on Stern Pro machines is right around $4,000. Distributors have a MAP price of $5,800 on new machines. That is ~$1800 profit per machine (before overhead). If Stern decided to pull back and distribute on their own, they could split the difference and sell machines for $4,800-$4,900 and decimate the boutique market. That additional $800-$900 per machine over what they are selling at wholesale now could easily cover the services a distributor offers over the 30/60 day warranty period at the volume Stern does business. There will still be room for independent service people to offer the services a distributor offers for an additional fee if they choose.
Distributors have traditionally been a sort of marketing arm of the manufacturer. This was especially true in the time before the internet came around. With the internet offering Twitch and Youtube streams, Pinside, Papa TV, etc, is the distributor still needed by the manufacturer?
Before everyone thinks I am crazy, something very similar to this has already happened several years ago in another couple of disposable income hobbies- HO/N scale Model Railroading and entry level Model Airplanes. Horizon Hobby bought up a couple of the major brands in these subjects, and then created their own in-house distributor network. They pulled their products out of the big traditional distributors like Walthers and Tower Hobbies, and went to their own distribution model to maximize profits previously lost to the middle man. They have a team that hits all the major shows with their display booth full of new products. So far, it has been working for them. So much so that smaller companies have formed since this time, and now are only selling direct to consumer.
What are your thoughts?
so you think stern should warehouse inventory, work out shipping to individuals, be on the hook for unsold games, and continue to make new ones at the same time? LOL Most tings are not sold to endusers right from the factory for a reason. Stern makes them and gets money upfront and get them out the door immediately, it does not matter to stern if they take a year to sell, they were already paid. The only issue for stern is if the distributor stops buying due to having too much inventory. Holding inventory is also a tax burden. as for trains and planes, how many fit in the space on pinball, the costs and space requirements are vastly different for warehousing. When you get to larger scale trains, rideables, or large model aircraft, those are not generally made in the 1000's a few get made as they sell a few more are made.
